Transcript STRUCTURE OF THE EUROPEAN SEMESTER AND IMPACT ON …

STRUCTURE OF THE EUROPEAN
SEMESTER AND IMPACT ON
WAGES AND COLLECTIVE
BARGAINING
CB TRAINING SEMINARS
MARCH 2014
POSSIBLE MOMENTS OF IMPACT ON WAGES
IN EUROPEAN SEMESTER
• POLICY MESSAGE IN AGS
• MARCH SPRING COUNCIL
• PUBLICATION OF IN DEPTH COUNTRY REVIEWS
• COUNTRY SPECIFIC RECOMMENDATIONS
• ….. NOT IN PREVIOUS SCHEME: IF COUNCIL DECLARES MACRO
ECONOMIC IMBALANCE TO BE « EXCESSIVE »
   ADDITIONAL PROCEDURE
AGS 2014: MAIN MESSAGES
• « Keep up the pace of reform »
• « Signs of economic improvement are an encouragement to pursue
efforts with determination »
• « Top priority is growth and competitiveness » so as to « build a
lasting recovery »
ON WAGES IN PARTICULAR
• « Further reform efforts to ensure wage developments in line with
productivity, thus supporting competitiveness and aggregate
demand »
PROBLEM WITH THIS WORDING?
• IS IT NOMINAL OR REAL WAGES TO BE IN LINE WITH PRODUCTIVITY?
• BACKGROUND: ECB OPENLY PUSHING FOR ‘NOMINAL’ WAGES IN LINE
WITH PRODUCTIVITY (SEE DRAGHI SPEECH TO EU MARCH 2013
COUNCIL)
• THIS IS NOTHING ELSE BUT THE OLD GERMAN MODEL OF ZERO UNIT
WAGE COSTS
A DECADE OF WAGE COST STAGNATION IN
GERMANY (UNIT WAGE COSTS 1999 = 100)
60
50
DE
40
IE
EL
ES
30
IT
CY
20
LU
MT
SL
10
SK
0
2001
-10
2002
2003
2004
2005
2006
2007
2008
2009
2010
Structural reforms: Be careful what you wish
for
INFLATION AND UNIT WAGE COSTS EURO AREA
5
4
3
2
1
0
97
98
99
2000
2001
2002
2003
2004
2005
2006
2007
-1
Unit wage costs
Inflation
2008
2009
2010
2011
2012
2013
2014
2015
The problem with structural reforms…
deflation is looming
ANOTHER PROBLEM: REALITY CHECK
Real wages and productivity 2008 -2015
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
Real wage
productivity
IN DEPTH COUNTRY REVIEWS: EXAMPLE OF
2013 CYCLE
• Wages take a central place
•
•
•
•
Eight member states
To be added: 4 MS under a Troika programm
Plus two MS to reduce tax burden on wages
Grand total of 12 (14) member states being ‘advised’ on what to do in the
domain of wages
General line
• MEMBER STATES HAVE REFORMED AND ARE ON THE RIGHT TRACK….
• … IN PRACTICE THESE HAVE BEEN REFORMS NOT REALLY TO TRADE
UNION LIKING….
• …. BUT MORE NEEDS TO BE DONE, FROM MONITORING REFORMS TO
DEEPENING REFORMS
WAGE INDEXATION RECOMMENDATIONS
• WAGE INDEXATION SYSTEMS: CONTINUE REFORMS
• BELGIUM AND LUXEMBOURG
• CYPRUS ALREADY IN « THE HOUSE OF EU GOVERNANCE »
• ITALY: COMMISSION DISAPROVES OF SETTING THE WAGE
COMPENSATION FOR INFLATION AT NATIONAL LEVEL NEGOTIATIONS,
STANDS IN THE WAY OF DOWNWARDS WAGE FLEXIBILITY AT LOWER
LEVELS
RECOMMENDATIONS ON MINIMUM WAGES
• FRANCE: 60% IS REALLY TOO HIGH (BUT TAX EXEMPTIONS TO BE
TAKEN INTO ACCOUNT
• SLOVENIA: 2010 HIKE IS STILL INDIGESTABLE
RECOMMENDATIONS ON WAGE SETTING
INSTITUTION
• SPAIN:EVALUATE REFORMS BY JULY, ACT BY SEPTEMBER (ALSO IN
EXCESSIVE IMBALANCE)
• SPANISH CENTRAL BANK: ALLOW EMPLOYMENT OUTSIDE THE
MINIMUM WAGE
GENERAL CALL ON HOW WAGES SHOULD
BEHAVE
• DENMARK AND FINLAND: MODERATE WAGE AGREEMENTS IN
NEARBY FUTURE
• FINLAND: AVOID 2007 ROUND OF HIGH WAGE PATTERN BARGAINING
ALL ABOUT DOWNWARDS WAGE
FLEXIBILITY…. EXCEPT FOR GERMANY ?
• « sustain conditions that enable wage growth to support domestic
demand »
• « to this purpose, reduce taxes and contributions especially for low
wage earners’
• In other words, « wages and domestic demand are being allowed to
rise in stronger economies »
• What has happened to :
* « create the conditions for wages to catch up with
productivity »
• * the proposal for a minimum wage in Germany?
A LOOK INSIDE DG ECFIN THINKING: « Free
prices »
• THEIR BASIC MODEL: DO AWAY WITH ALL RIGIDITIES THAT BLOCK OR
DELAY PRICE ADJUSTMENT INCLUDING WAGES
• THIS WILL PRODUCE DOWNWARDS WAGE ADJUSTMENT….
• …BUT ALSO UPWARDS WAGE ADJUSTMENT (WHERE NECESSARY AND
DESIRABLE)
• SO, IN THEIR MINDSET, NO SYSTEMIC BIAS AGAINST WAGES IF FOR
EXAMPLE MINIMUM WAGES/ERGA OMENS COLLECTIVE
BARGAINING/TRADE UNIONS ARE WEAKENED EVERYWHERE
• « THE MARKET WILL TAKE CARE OF EVERYTHING »
THIRD MOMENT OF IMPACT: MEMBER STATE
DECLARED IN MACRO ECONOMIC EXCESSIVE
IMBALANCE
• Last year: Spain and Slovenia
• This year: Spain out, Italy in and Slovenia remaining
Obligation to present ‘corrective action plan’
⇓
Commission examines strictly
⇓
If MS does not comply, Commission
can impose sanctions
RECOMMENDATIONS OR ORDERS?
• ‘Recommendations’ are evolving:
• Troika country experience: A (hostile) takeover by DG ECFIN, ECB,IMF
• ECB and market pressure collide: See secret letters to Italy, Zapatero, with
reforms along the above lines in return for ECB support of sovereign debt
• Already legally existing: Sanctions in economic governance procedures with
‘qualified reversed majority’ voting
RECOMMENDATIONS OR ORDERS?
• In the pipeline:
• Macro conditionalities in the new MFF for structural funds
• Contactual arrangements under the disguise of a Euro Fiscal Capacity/Social
Europe EU unemployment fund: « Solidarity in Reform’
• Ex ante coordination of reform policy
• Background to these: EMU Blueprint
• « To make CSR’s really binding »
• « To have adjustment programs such as in Troika countries for the whole of europe »